Starting a Business
I am writing a business plan, where do I find industry statistics and gross sales?
Gross sales vary widely, depending on many factors in the frozen dessert industry. Factors that can affect gross revenue include seasonality, type of location, competition, operator ability. Statistics can be found by finding your Standardized Industry Classification (SIC) code from the United States Securities and Exchange Commission (www.sec.gov). The SIC codes most associated with the retail ice cream industry are 5810 (eating and drinking places – retail), and 5812 (eating places – retail). Be sure to keep in mind that many types of businesses may be included in SIC analysis. Other places to look can include franchise circulars from similar type businesses. Getting involved in trade associations such as NICRA, and meeting owners of similar businesses can also be a good way to learn how existing businesses are financially performing.
How much does it cost to open a store?
The cost to build out and open a store can range from as little as taking over the lease payments of a closed location, to millions of dollars purchasing land and building a free standing AAA+ location. Starting an ice cream business can often be a function of your capacity and willingness to pay for highly desired locations, as well as compromising design elements to make a project fit within your budget. It is not uncommon to purchase existing locations for $50,000 or less, pay $100,000 - $500,000 to build an inline shopping center location, or spend $1m+ on a free standing AAA+ location. Construction costs tend to fall in the $70 - $150 per square foot range plus equipment costs. Construction costs can vary greatly depending on what part of the country you would like to build. Equipment costs largely depend on the type of operation being built. Soft serve, hard serve, gelato, homemade or supplier supplied product, walk in, walk up, or drive through can all affect the cost of equipment. Deciding common funding mistakes that business owners make are not budgeting enough for construction, equipment, working capital, and additional “safety net” cash.
What type of equipment do I need?
Depending on the location, type of store being built, and customer demands, equipment can range from a simple ice cream dipping cabinet, a couple of sinks, and dry storage, to elaborate water cooled refrigeration with manufacturing and backup systems, multiple soft serve machines and ice cream dipping cabinets, plus cooking equipment, computers and drive-thru windows. Be sure to check with your local health department for any special requirements, and to collect equipment specification sheets from your equipment supplier. A typical equipment (excluding small wares) list might include:
Where can I obtain information regarding licenses and permits for opening an ice cream store?
Places to start include your city or county business license division, local health department, state sales tax agency for a sellers permit, and state employment department for a state employer tax identification number. Your state government website should have a “How to open a business link”. You will also want to contact the Internal Revenue Service (www.irs.gov) to apply for a federal tax identification number. Ask the local agencies if they have a checklist of documents that you need to open your business. Other sources include a business attorney, local S.C.O.R.E. counselor, college Small Business Development Center (SBDC), and the Small Business Administration (SBA), local architects or general contractors.
How much money can I make?
It depends on your goals, leadership abilities, business knowledge, and type of location and business you have. Business owner goals range from “having a tax write off or hobby”, to building businesses that produce comfortable incomes and returns on their investment. Much of the money that business owners earn is reflected in the business planning and concept that they create, their ability to connect with the community, and execution of the owner’s business skills, matched with their lifestyle goals that they would like the business to provide.
How big (or small) should the store be?
Store size depends on many factors, and raises many more questions. Is it a dine-in or walk up location? Will you be manufacturing ice cream or reselling? What menu items will be sold? How often can you receive deliveries? (Relates to storage) How much visual impact is needed to be perceived as a “good location”? Ice cream stores can range as small as 80 square feet, to well over 4,000 square feet.
How do I find a good location?
Find a reputable real estate broker that specializes in commercial sales or leasing. They know of many projects that are up and coming. Consider joining the local Chamber of Commerce to learn what projects are new. Some of the best sites might be worth waiting for. Below market rates are often below market for a reason. Be sure to find out why. Be sure to check the county/city master plan so that you know what is proposed around the area. Check traffic counts.
Eliminate as many “unknowns” as possible. List all of the things that you may think are elements of a good location, and compare them to other similar businesses that you see as successful. Learn what successful multi-unit operators use as their general site selection criteria. It is easy to be biased toward a location that you may already like. Try to be as unbiased as possible. Meet other business owners who have successful locations similar to the concept and vision that you have, and ask them, “What is important in a location to you?” It could be proximity to a school, park, recreation area, tourist area, etc. Create a scored number system if possible weighing the important things to customers in the community that you would like to open. For example, if ample parking is important to your customers in a suburban neighborhood, then close, easy parking may weigh higher on your score sheet than someone in a downtown residential location near a mass transit stop.
How do I find help with store design and layout?
Meet with equipment suppliers and ask for referrals. Ask other business owners who designed their store. Ask contractors for referrals. Join trade associations such as NICRA and meet consultants that work in the industry. Visit other stores and note design elements that you like, as well as those that you do not like, and then begin putting your ideas down on paper. Be sure to design an efficient workflow for employees, as well as adequate flow pattern for customers.
Who is an average customer and how much do they spend?
Depending on the market where your business is located; your average customer can be a vacationing family who stops in once or twice a year, to a local resident who stops in everyday after lunch for a treat. Average transaction amounts generally fall into the popular categories; Single scoop cones, small or medium cups, etc.
What are the Federal standards for ice cream and other frozen desserts?
Ice cream is a frozen food made from a mixture of dairy products, such as milk, cream and nonfat milk, combined with sugars, flavorings, fruits, nuts, etc. Ice cream containing at least 1.4% egg yolks is called frozen custard or French ice cream. Ice cream and frozen custard must contain a minimum of 10% milkfat and weigh not less than 4.5 pounds per gallon. Light ice cream is reduced in fat by at least 50% in comparison with an appropriate reference food.
Sherbet contains 1 to 2% milkfat and 2 to 5 % total milk solids. Water flavoring, sweetener and stabilizers are added. Sherbet must have a final weight per gallon of at least 6.0 pounds and have a lower overrun than ice creams, ranging from 25 to 50%
Ice or Water Ices have essentially the same composition as sherbets except that they contain no milk solids and no egg ingredient other than egg white. They are typically between 0 to 30% overrun.
Sorbet is similar in composition to an ice. It has a relatively high sugar content (30%) and fruit/fruit juice content (30-50%), generally contains egg white and pectin or stabilizer, and has an overrun of 20% or less.
There are no federal standards for frozen yogurt and gelato. However, approximately 20 states now have standards for frozen yogurt. Check with your state to see if they have standards for frozen yogurt.
Do not forget the value of belonging to your industry organization, NICRA, where you can ask your fellow members for their advice to help you with many of your questions and concerns. We are the only national organization representing independent frozen dessert retailers. NICRA is full of members who know the ropes, and are willing to share experiences with you. You will find the annual convention packed full of information to help get your business going, and get it to the next level.